1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 134
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
The divergence between 10-year U.S. Treasury and JGB yields and USD/JPY, suggests Japan
may raise rates more than expected, with global implications
6
180
5
160
4
140
3
120
2
100
1
80
0
2002
60
2004
2006
2008
2010
2012
2014
2016
2018
JPN-US 10Y Yield Var. (lhs)
2020
2022
2024
USD/JPY FX (rhs)
Sources: Scotia Wealth Management, FactSet
MSCI Japan’s three-year CAGR shows outperformance versus the S&P 500 amid higher
inflation. Though it is uncertain this will continue, select sectors remain well-positioned
(2002-2025)
20%
4%
3%
10%
2%
1%
0%
0%
-1%
-10%
-2%
-3%
-20%
-4%
2002
2004
2006
2008
2010
2012
2014
2016
3Y CAGR MSCI Japan and S&P500 var.
2018
2020
2022
2024
Japan CPI
Sources: Scotia Wealth Management, FactSet
Emerging Markets
Shifting to emerging markets, the outlook for Chinese equities remains murky due to uncertain,
albeit more stabilized, U.S. trade relations, property sector stress, and demographic headwinds
from an aging population. However, we see opportunities for above-average growth in select
pockets of the market, particularly AI and technology, automation, and power generation.
China’s growth over the next few years is likely to look different from the past – driven more by
higher value-added and innovation-led sectors than by traditional industries. In the AI race,
Chinese players are well positioned in digital payments and e-commerce. China’s five-year plan
also supports prioritizing high-end technology, particularly semiconductors and AI, manufacturing
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